With Hertz emerging from a bankruptcy with a positive result for shareholders, we are reminded of the interplay between the equity markets and the bankruptcy alternative.

Some firms facing financial challenges during the pandemic were able to avoid a bankruptcy filing altogether because of their ability to raise the necessary funds through an equity offering. Hertz provides an example of a situation where the bankruptcy filing instead of wiping out the equity enhanced value.

The Supreme Court of the United States denied a petition for writ of certiorari of the debtor, Castleton Plaza, LP, in Castleton Plaza, LP v. EL-SNPR Notes Holdings, LLC, Case No. 12-1422, meaning the prior opinion from the Seventh Circuit Court of Appeals in In the Matter of Castleton Plaza, LP, 707 F.3d 821 (7th Cir. 2013), remains intact, protecting creditors who are faced with being shortchanged by a reorganization plan proposed by a debtor that attempts to transfer the future ownership of the debtor to an insider without first putting the ownership stake up for auction.